Belated Filing of Form 10B During Appellate Proceedings Does Not Disentitle a Registered Trust from Section 11 Exemption: ITAT Pune

Overview of the Case

The Income Tax Appellate Tribunal (ITAT), Pune, recently ruled in favour of Sahaj Seva Trust in a dispute concerning Assessment Year 2014-15, holding that the denial of exemption under Section 11 and Section 12 of the Income-tax Act, 1961, purely on the ground of delayed submission of the audit report in Form No. 10B, was not legally sustainable. The Tribunal concluded that the filing requirement under the relevant provisions is directory in nature and that a belated but otherwise valid submission of Form No. 10B during appellate proceedings ought to be accepted.

This ruling reinforces a well-established line of judicial thinking — that procedural lapses, particularly those not causing any prejudice to the Revenue, should not be permitted to override the substantive entitlement of a genuinely registered charitable trust to statutory exemptions.

Background and Factual Matrix

Sahaj Seva Trust is a charitable trust registered under Section 12A of the Income-tax Act, 1961. For Assessment Year 2014-15, the trust claimed exemptions under Section 11 and Section 12 in its income-tax return. However, the audit report in Form No. 10B — a document required to be filed along with or before the return of income — was not submitted within the prescribed time limit.

The Assessing Officer, acting under Section 154 read with Section 143(1) of the Act, passed an order dated 14 January 2021 denying the trust the benefit of exemptions under Section 11 and Section 12, treating the non-filing of Form No. 10B as a disqualifying default.

The assessee carried the matter in appeal before the National Faceless Appeal Centre (NFAC), Delhi. During the course of appellate proceedings, the trust furnished Form No. 10B on 2 March 2022. The trust also placed on record a letter dated 13 March 2022 evidencing its valid registration under Section 12A. Despite this, the Commissioner of Income Tax (Appeals) declined to admit the belatedly filed audit report and upheld the denial of exemption through an order dated 17 December 2024.

Aggrieved by this outcome, Sahaj Seva Trust filed a further appeal before the ITAT, Pune.

Arguments Advanced Before the Tribunal

Assessee's Contentions

The trust submitted the following key arguments before the ITAT:

  • It held a valid and subsisting registration under Section 12A of the Income-tax Act, 1961, as confirmed by the registration letter dated 13 March 2022.
  • Form No. 10B had been duly filed on 2 March 2022 during the pendency of appellate proceedings, which was prior to the final decision by the first appellate authority.
  • The requirement of filing Form No. 10B is directory and not mandatory, meaning that non-compliance or delayed compliance does not automatically result in forfeiture of exemption.
  • The CIT(A), exercising co-terminus powers with the Assessing Officer, ought to have admitted the audit report submitted during appellate proceedings and decided the exemption claim on merits.